Per HedgeWorld,
Peter Wuffli’s sudden departure from his role as chief executive of Swiss banking giant UBS has caused some speculation among the local press, who are describing it as a “surprise move.” …
… In recent years UBS has rapidly overtaken Credit Suisse as Switzerland’s largest bank, but has suffered a number of setbacks lately. As a result, the bank’s share price has underperformed those of rivals such as Credit Suisse and Deutsche Bank by a wide margin over the past year.
Reversals that have affected the performance of the bank include the closure of New York-based trading unit Dillon Read Capital Management little more than a year after it began trading in earnest Previous HedgeWorld story. The unit suffered a series of trading losses related to wrong bets in the U.S. subprime mortgage market totaling around $124 million at the beginning of the year. In early May, a UBS spokesperson said the unit would be wound up at a cost of around $300 million to the bank. Some Zürich traders suggested that it was these hedge fund losses that ultimately cost Mr. Wuffli both the leadership of the bank and his future position as board chairman. Bank spokespeople refused to confirm that.
Not to mention,
NEW YORK (Reuters)—Heavy redemptions from investors concerned about their holdings of subprime mortgage securities claimed Braddock Financial Corp.’s Galena Street Fund as the latest hedge fund victim. Braddock, a top-performing bond hedge fund manager, on Thursday said it will liquidate the $300 million fund after redemptions slashed its assets by a quarter since 2006, Chief Executive Officer Harvey Allon said in an interview. The fund’s closure comes just days after United Capital Markets Holdings Inc. suspended redemptions on its funds exposed to the risky subprime mortgages.
The bleed thickens …
July 6, 2007 No Comments
According to the Financial Times, buyers are showing no interest whatsoever in the wreckage left over from Bear’s two subprime hedge funds — at least, not at Bear’s ask price of 11 cents on the dollar.
Investors in the worse-hit of two stricken Bear Stearns hedge funds are offering to sell their holdings for as little as 11 cents on the dollar but still finding no buyers, according to unfilled trades on Hedgebay, a secondary market for funds.
Vulture funds and others have been quick to bid for holdings in the two funds, but the best bid for Bear Stearns High-Grade Structured Credit Strategies Enhanced Leveraged Fund, the more geared of the two, is just 5 cents on the dollar.
ADVERTISEMENTPrivate sales of stakes are the only way investors can exit the two Bear funds, after the bank suspended redemptions in May amid a wave of withdrawals.
“There are buyers but they can’t agree on price,” said Jared Herman, co-founder of Bahamas-based Hedgebay.
The less-geared Bear Stearns High-Grade Structured Credit Strategies Fund, which the bank has rescued with a $1.6bn loan, is being offered at about 70 cents on the dollar. The fund is only attracting bidders at about 30 cents, according to people who use the system.
All the talk about “hedge funds containing the contagion” was laughable. Sure, there are bidders; but the value of the bids is less than half of the offers!
Also, note that the bigger Bear fund will probably end up liquidating for 5-10% of total value. You can’t do much worse than -90% return. The question is, how many other funds are sitting on the same time bomb?
July 5, 2007 No Comments
From Yahoo:
The turmoil in the global credit markets claimed another victim on Thursday as Caliber Global Investment, a London-listed fund, said it would sell its assets and return capital to investors following losses related to risky US subprime mortgages.
…
Also on Thursday, Carlyle Group, the US private equity company, delayed at the last minute the flotation in Amsterdam of an investment fund dealing in residential mortgage-backed securities in order to cut the offer price because of market volatility.
June 29, 2007 No Comments
From the WSJ.
According to Cap Gemini and Merrill Lynch’s World Wealth Report, issued Wednesday, the rich cut their exposure dramatically to “alternative investments” — a class that includes hedge funds, private equity, structured products, venture capital and currencies.
In 2005, the world’s financial millionaires (those with investible assets of $1 million or more, not including primary residence) had 20% of their investments in alternatives. In 2006, they cut that exposure in half — to 10%.
June 28, 2007 No Comments
Harry Kay featured in this New Yorker article provides some answers:
Kat followed through on his hedge fund skepticism by conducting two hedge fund related studies. The first, published in the June 2003 Journal of Financial and Quantitative Analysis, looked at the fee-adjusted returns of 77 funds from 1990-2000 in relation to returns generated by market benchmarks with similar risk profiles. The result – 72 of 77 funds failed to outperform the benchmark.
The second, posted online as a working paper in 2006, looked at more than 1,900 funds and generated a similar result. Only 18% of funds beat the designated benchmark, and the most successful funds had declining returns over time. The after-fee alpha was negative in the vast majority of cases.
June 27, 2007 1 Comment
With more competition than ever, hedge funds are investing in ever more risky and exotic items.
This Dirk Pitt style find of $500 million in gold has made some hedge fund investors rich:
The once-in-a-lifetime find is reportedly valued somewhere around $500 million and is fetching some pretty hefty dividends for a lot of the hedge funds invested in the company.
GLG Partners and Fortress Investment Group, who have a combined 20 percent stake in the company, were the largest beneficiaries from the historic find. Other hedge funds reaping the benefits of the May 18 discovery are Dimensional Fund Advisors, D.E. Shaw & Co. and Galleon Management.
How hard up for suitable investments do you have to be to dream this up. Is this anything but a very speculative bet on the global liquidity glut continuing? Small upside and a very large downside – for the investors anyway – the 2/20 managers will do just fine:
Florian Leonhard, a London-based violin dealer and restorer, is aiming to start investing the Fine Violins Fund once it has raised $50m, with a target of returning 8 per cent to 12 per cent a year.
…But some investors worry about the dangers of putting money into assets that are hard to sell and where there is difficulty in establishing what drives prices. Such reservations helped scupper plans last year by Stanley Gibbons, the London stamp dealer, to launch a hedge fund investing in stamps.
However, once obscure assets are becoming mainstream, with reinsurance, direct loans, carbon credits and film financing being given attention.
May 24, 2007 No Comments
The next step would be to get an insider on the jury to front run the verdict. Don’t think that no one is working on it:
Hedge fund managers are always looking for an edge. Lately they’ve found one by sending patent litigators to court — not to try a case, but as highly informed (and highly paid) observers. Their task: to pick up and quickly report back to the money managers any intelligence that could move a stock.
Litigators have often been called in to evaluate the investment impact of a patent conflict during the course of due diligence for an acquisition. Now hedge funds are moving earlier and faster. They are putting lawyers in the courtroom to report on the outcome of a trial as it is happening. “I hear these stories of Markman hearings; the minute the ruling comes down, 15 guys jump up and run out of the room,” says Ron Laurie, of Inflexion Point Strategy, an IP investment bank. “These guys are texting the hedge fund, so they can short the stock.” By the time the market-moving information hits financial news services like Bloomberg, the investors get to take their gains.
May 10, 2007 No Comments
Most market followers will be familiar with the tactics discussed in this BusinessWeek article. This hedge fund has an interesting parasitic niche:
… In the bankruptcy of the former Adelphia Cable, hedge funds including W. R. Huff Asset Management and Appaloosa bought the company’s bonds on the assumption that Adelphia would be able to recover money by suing former auditor Deloitte & Touche. Deloitte and a group of banks agreed in December, 2006, to pay Adelphia investors $455 million to settle the case. Deloitte was responsible for $210 million of the agreement.
May 9, 2007 No Comments
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